Thursday, January 20, 2011

Another Dip for Equity Speculators

As we've heard from countless pundits and analysts, stocks are cheap and headed higher in 2011.

The market, however, and continued unemployment and rising homelessness, tell us that American consumers are all but tapped out and seething over higher fuel and now, food prices. Ben Bernanke's great experiment with QE2, now well into its third month, continues to shovel money at the Primary Dealers, who, in turn, speculate and control the stock markets.

When they wish to sell, they do. When they desire gains, they simply hit the "BUY" button and spend the money the Fed has lavished upon them, which is why today's decline was simply wiped away and turned into a smallish dip. The speculators have all of their bets covered and will crush anybody, short or long, standing in the line of fire.

Stocks were getting creamed earlier in the day before the pretenders of recovery decided to give the market a little boost with some controlled buying. The Dow was down as much as 80 points before recovering into the close with only a small loss, though little could be done to stem the tide against Apple and other tech stocks on the NASDAQ, which suffered through another drubbing, the second in as many days. The NASDAQ, probably the most inflated of the major indices, has lost 62 points over the course of the last two sessions, but that's only the very beginning of what appears to be a massive exodus from high-flying tech names, since the index is up more than 600 points since September, 2010.

Dow 11,822.80, -2.49 (0.02%)
NASDAQ 2,704.29, -21.07 (0.77%)
S&P 500 1,280.26, -1.66 (0.13%)
NYSE Composite 8,076.72, -28.20 (0.35%)

Despite the marginal losses overall, especially on the Dow and S&P, the A/D line told a more sinister story. Declining issues beat back advancers by better than a 2:1 margin. Losers beat winners, 4359-2107. On The NASDAQ, there were 36 new highs to 22 new lows, the convergence now notable and significant of a major turning point. On the NYSE, new highs held sway over new lows, 44-24, also close to doing a complete reversal. Volume picked up again today, marking the best of the week, which is bad news for holders of stocks, generally.

NASDAQ Volume 2,277,221,500.00
NYSE Volume 5,579,977,500

What moved markets and commodities on the day was a set of data points out of China, where inflation is running at a 4.6% rate (probably higher) and the government is under increasing pressure to keep a lid on rising food prices. Unlike in the USA, where higher prices for things we put in our bodies is simply a sign of "recovery" and passed along to the consumer, in China people have a tendency to get a little bit crazier when they are facing wholesale starvation. If China doesn't clamp down hard on rising prices, there will be riots and military movements inside the Great Wall.

Commodities reacted strongly to China's inflation data, as they should have. Oil moved lower by $2.00, to $88.86, its lowest level in two weeks. Gold was pounded lower by $23.70, to $1,346.50, a two-month low, but likely only a temporary setback. Silver was punished mercilessly, losing more than 4.5%, down $1.33, to $27.47. Surely, the gold and silver trade is once again in the hands of the major world banking interests, who are resolute - though highly unsuccessful - in keeping prices of the precious metals down. But they will on occasion carry the day, or week, though for the multitude of investors who swear by gold and silver, these continued declines appear as buying opportunities.

Friday marks option expiration for a multitude of stocks and that derivative market will influce trading on the final session of the week. Monday now appears as the best possible continuation of the down-trend.

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